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Infosys Defends Raise For COO That Narayana Murthy Objects To

The company's founders, who still own 12.75 percent of the group, had earlier questioned the pay rise granted to chief executive Vishal Sikka.

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Infosys Defends Raise For COO That Narayana Murthy Objects To

The new conflict comes after dispute between founders and the management in February

The dispute between founders and board of India's second largest software services company Infosys Ltd over governance issues spilled into the public again as founder Narayana Murthy criticized a salary hike given to Chief Operating Officer Pravin Rao. Infosys responded by stating that Mr Rao's "compensation revision reflects the philosophy of aligning the interests of our leadership team to long term shareholder interests."
Here are the 10 latest developments in this story
  • In a letter, Mr Murthy described the raise for the COO, sanctioned in February this year, as "grossly unfair to the majority of the Infosys employees."
  • "The impact of such a decision will likely erode the trust and faith of the employees in the management and the board," said Mr Murthy in a letter that has been published in full.
  • The company's founders, who still own 12.75 percent of the group, had earlier questioned the pay rise granted to chief executive Vishal Sikka and also the size of severance payouts given to others, including former finance head Rajiv Bansal.
  • According to a stock exchange filing by the company, only 24 percent of promoter votes cast voted in favour of a resolution seeking a 35 percent rise in the COO's compensation, while the rest of the voters abstained.
  • The new conflict comes after the company in February reassured investors and analysts it was not being distracted by a dispute with its founders over how the company was being managed.
  • "Giving nearly 60 percent to 70 percent increase in compensation for a top level person (even including performance-based variable pay) when the compensation for most of the employees in the company was increased by just 6 percent to 8 percent is, in my opinion, not proper. This is grossly unfair to the majority of the Infosys employees..." wrote Mr Murthy.
  • Mr Murthy referred in detail to "compassionate capitalism", stating that without it, "this country cannot create jobs and solve the problem of poverty. Experts tell me that capitalism may come to an end in the not-so-distant future if the current corporate leaders do not heed this advice in India. "
  • Referring to the decision on Mr Rao's raise, he said that "No previous resolution in the history of the company has received such a low approval."
  • In February, Infosys Board Chairman R Seshasayee defended the pay rise for CEO Vishal Sikka, and said that he enjoys the board's complete confidence. Today, Dr Sikka said that the COO's revised  compensation "as with several of our senior leadership team, is focused on making Infosys more competitive, is benchmarked against peers, is critical for us to retain key talent and aligns the long term interests of our leadership team with that of our shareholders."
  • Infosys will announce its March quarter earnings on April 13. Analysts will be looking forward to comment from the company's management on the fresh issues raised by Mr Murthy. Infosys shares fell today by 1.3 percent. Shares of IT companies have underperformed in the March quarter in part because of concerns over changed US rules for H-1B visas. The US accounts for 60 per cent of Indian IT's exports. So a rise of the Indian currency against the dollar hurts the earnings of large Indian IT firms.



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Highlights

1
Raise for COO -grossly unfair- to other employees: Murthy.
2
Pay hike critical to retain talent, says Infosys.
3
Infosys founders earlier questioned raise for CEO Vishal Sikka.

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